TORONTO, ONTARIO — (Marketwired) — 11/05/14 — RioCan Real Estate Investment Trust (“RioCan”) (TSX: REI.UN) –
RioCan–s HIGHLIGHTS for the three and nine months ended September 30, 2014 were:
RioCan Real Estate Investment Trust (“RioCan”) today announced its financial results for the three and nine months ended September 30, 2014.
“I am pleased with our financial results again this quarter as operationally, the portfolio is performing well and occupancy ticked up slightly. Our rental renewals are strong, and we are seeing good same store growth out of our portfolio in Canada and the US. Interest rates remain very attractive, and during the quarter, with favourable terms on the Trust–s fixed rate mortgage borrowings. RioCan also issued an additional $100 million out of its Series V debenture at an effective rate of 3.6% with an eight year term to maturity.” said Edward Sonshine, Chief Executive Officer of RioCan. “The development pipeline is producing good results this year, our Tanger Outlets Kanata opened after the quarter end and our expansion at Cookstown will be opening later this week. Over the last twelve months ending September 30, 2014, RioCan has been able to transfer 1.2 million square feet of completed projects at RioCan–s interest to our investment property portfolio.”
Financial Highlights
All figures in Canadian dollars unless otherwise noted. RioCan–s results are prepared in accordance with International Financial Reporting Standards (“IFRS”). Consistent with RioCan–s management framework, management uses certain financial measures to assess RioCan–s financial performance, which are not generally accepted accounting principles (GAAP) under IFRS. For a full definition of these measures, please refer to the “Use of Non-GAAP Measures” in RioCan–s third quarter 2014 Management Discussion and Analysis.
Operating FFO at RioCan–s interest for the third quarter of 2014 was $134 million or $0.43 per Unit compared to $124 million or $0.41 per Unit for the third quarter in 2013, representing an increase of $10 million or 7.8%. On a per Unit basis, Operating FFO increased by $0.02 per Unit or 4.9%.
The $10 million increase in Operating FFO at RioCan–s interest for the third quarter of 2014 compared to the same period in 2013 is primarily due to the following:
Operating FFO at RioCan–s interest for the first nine months of 2014 was $388 million or $1.27 per Unit, compared to $368 million or $1.22 per Unit for the same period in 2013, representing an increase of $20 million or 5.3%. On a per Unit basis, Operating FFO increased by $0.05 per Unit or 4.1%.
The $20 million increase in Operating FFO at RioCan–s interest for the first nine months of 2014 as compared to the same period in 2013 is primarily due to the following:
Same Store and Same Property NOI
Leasing and Operational Highlights:
Highlights:
Portfolio Activity and Acquisition Pipeline
During the third quarter, RioCan completed two acquisitions of interests in income producing properties for a total purchase price of $52 million in Canada with a weighted average capitalization rate of 5.3%. RioCan completed the purchase of one income property in the US during the third quarter at a purchase price of US$29 million with a capitalization rate of 6.1%.
Acquisitions Completed in the Third Quarter
Canada
US
Acquisitions Completed Subsequent to the Quarter End
On October 24, 2014, RioCan completed the acquisition of a 40.34% interest in the 47,000 square foot medical office building at Mill Woods Town Centre at a purchase price of approximately $5 million, representing a capitalization rate of 6.1%. In connection with the acquisition, RioCan assumed approximately $2 million in mortgage financing carrying interest at 4.40%, maturing in December 2015. RioCan owns a 40.34% interest in Mill Woods Town Centre, which is a 538,000 square foot single-level enclosed shopping centre located in Edmonton, Alberta, anchored by Target, Canadian Tire and Safeway. Partner Bayfield Realty Advisors holds the remaining interests in both the shopping centre and medical office building, and was the vendor of the 40.34% interest that RioCan acquired in the medical office building.
Acquisitions Under Contract (Firm)
RioCan has one income property acquisition under firm contract in Canada that would represent an acquisition of $32 million, at a capitalization rate of 5.5%.
Canada
Conditional Acquisitions
RioCan has income property acquisitions under contract in Canada where conditions have not yet been waived that, if completed, would represent acquisitions of $49 million, at RioCan–s interest. These transactions are undergoing due diligence procedures and while efforts will be made to complete the transactions, no assurance can be given.
Pipeline Acquisitions
RioCan is currently in negotiations regarding income property acquisitions in Canada and the US that, if completed, would represent approximately $58 million of additional acquisitions at RioCan–s interest. These transactions are in various stages of negotiations and while efforts will be made to complete these negotiations, no assurance can be given.
Property Dispositions Under Contract
Income property dispositions
RioCan has dispositions of income properties under conditional contracts where conditions have not yet been waived for approximately $186 million, at RioCan–s interest. The Trust–s mortgage obligation related to these properties is approximately $50 million. Prior to the disposition date, RioCan will repay the mortgage associated with one of the properties of approximately $8 million, at RioCan–s interest.
Land dispositions
RioCan has dispositions of land parcels under conditional contracts where conditions have not yet been waived for approximately $14 million. These land parcels are free and clear of financing.
RioCan is also in the process of marketing for sale land parcels with an aggregate fair value as at September 30, 2014 calculated in accordance with IFRS of approximately $25 million. These land parcels are free and clear of financing. RioCan is under no obligation to proceed with the proposed dispositions which, if completed, will be done to facilitate its objective of paring its portfolio and focusing on major markets.
Other dispositions
RioCan and its partner, KingSett, have entered into an agreement with the developer, Embassy BOSA Inc., to sell up to $30 million in air rights (representing 600,000 square feet) above the CPA development site, along with approximately $40 million in cost reimbursement for infrastructure works. Embassy BOSA Inc. has waived its due diligence conditions. The transaction remains subject to a number of both mutual and unilateral normal course development conditions. The intention is for two residential towers to be erected upon the planned retail podium. The transaction contemplates that Embassy BOSA Inc. be responsible, on a cost to complete basis, for all incremental costs associated with the residential component of the overall project.
Development Portfolio
As at September 30, 2014, RioCan had ownership interests in 15 development projects that will, upon completion, comprise about nine million square feet (five million square feet at RioCan–s interest). In addition to its development projects, RioCan continued its urban intensification activities, primarily in the Toronto, Ontario and Calgary, Alberta markets.
During the third quarter, RioCan transferred from properties under development to income producing properties $188 million in costs pertaining to 520,000 square feet of completed greenfield development or expansion and redevelopment projects. For the nine months ended September 30, 2014, RioCan transferred $330 million in costs pertaining to 997,000 square feet.
Development Project Updates – recent events
Demolition around the existing Toronto-Dominion Bank (“TD Bank”) branch at RioCan–s Northeast Corner, Yonge and Eglinton site in Toronto, Ontario is largely complete and construction has begun at the site. The land assembly was acquired in 2011 with Metropia and Bazis for the purpose of redeveloping it into a mixed-use retail and residential property. It is anticipated that the project will contain two residential towers totalling 62 and 36 floors, an office component, as well as a 57,000 square foot retail component upon completion. The property will feature a flagship TD Bank branch at the corner of Yonge and Eglinton. RioCan–s ownership interest in the property is 50%. The Condominium portion of the property will contain 622 units of which 602 units have been sold.
During the quarter, RioCan completed the redevelopment at Collingwood Centre, where the former Zellers store was returned to RioCan and the space was then re-demised and expanded to include new tenants such as, Winners, Bed Bath & Beyond, Sport Chek and Carters in addition to an expansion of the FreshCo grocery store.
During the quarter, RioCan completed the Tanger Outlets Kanata development, and on October 17, 2014, celebrated the grand opening of this newly completed outlet shopping centre. The initial response has been very positive and has surpassed expectations. The nearly 300,000 square foot Outlet Shopping centre that contains more than 75 designer stores such as; Coach, Nike Factory Outlet, Polo Ralph Lauren, J. Crew Outlets and Brooks Brothers Factory Store.
RioCan also completed the expansion work during the third quarter at the Tanger Outlets Cookstown, Ontario location and will celebrate the grand opening on November 7, 2014. This expanded and remodelled site includes 80 designer outlet stores, doubling the size of the former centre. New stores include Banana Republic Factory Store, Nike Factory Store, Under Armour and Carter–s/Oshkosh.
These outlet centres, together with our properties in Bromont and St. Sauveur near Montreal, Quebec, which are operated and managed by RioCan, comprise a portfolio of four outlet shopping centres aggregating nearly 900,000 square feet of retail space servicing three of Canada–s six largest markets.
Development Acquisitions Completed During the Third Quarter
During the Third Quarter, RioCan did not acquire any interests in development properties.
Development Acquisitions Completed Subsequent to the Third Quarter
On November 3, 2014, RioCan completed the acquisition of a 50% interest in the site where TD Bank is currently located at the northeast corner of Yonge Street and Eglinton Avenue in Toronto, Ontario, at a purchase price of $12 million ($6 million at RioCan–s interest). The property was acquired free and clear of financing, and forms part of the existing Northeast Yonge Eglinton land assembly, acquired in 2011 with Metropia and Bazis for the purpose of redeveloping into a mixed-use retail and residential property. RioCan and its partners obtained zoning approval and the redevelopment commenced in April 2014.
Development Property Acquisitions Under Contract
RioCan currently has two development sites in Canada under firm contract where conditions have been waived that, if completed, represent acquisitions of $5 million at RioCan–s interest.
As a result of the seller being unable to satisfy certain conditions, RioCan and its partner, Tanger, will no longer be proceeding with the acquisition of the lands adjacent to Calloway Park near Calgary, AB as disclosed last quarter.
Liquidity and Capital
Financing Highlights for the Third Quarter
Unencumbered Assets
As at September 30, 2014, RioCan–s unencumbered asset pool was comprised of 100 assets with an aggregate fair value of $2.7 billion.
Credit Facilities
At September 30, 2014, RioCan has five revolving lines of credit in place having an aggregate capacity of $715 million with $514 million available to be drawn.
Term Financing
Canada
US
Trust Units
On July 25, 2013, RioCan announced the TSX approval of its notice of intention to make a normal course issuer bid (“NCIB”) for a portion of its Units as appropriate opportunities arise from time to time. During the third quarter RioCan did not make any purchases of Trust Units.
RioCan–s Consolidated Financial Statements, Management–s Discussion and Analysis for the three months ended September 30, 2014 is available on RioCan–s website at .
Conference Call and Webcast
Interested parties are invited to participate in a conference call with management on Wednesday, November 5, 2014 at 9:30 a.m. eastern time. You will be required to identify yourself and the organization on whose behalf you are participating.
In order to participate, please dial 416-340-2218 or 1-866-225-0198. If you cannot participate in the live mode, a replay will be available until December 3, 2014. To access the replay, please dial 905-694-9451 or 1-800-408-3053 and enter passcode 3105116#.
Scheduled speakers include Edward Sonshine, O.Ont. Q.C., Chief Executive Officer, Fred Waks, President and Chief Operating Officer and Rags Davloor, Executive Vice President and Chief Financial Officer. Management–s presentation will be followed by a question and answer period. To ask a question, press “star 1” on a touch-tone phone. The conference call operator will be notified of all requests in the order in which they are made, and will introduce each questioner.
Alternatively, to access the simultaneous webcast, go to the following link on RioCan–s website and click on the link for the webcast. The webcast will be archived 24 hours after the end of the conference call and can be accessed for 120 days.
About RioCan
RioCan is Canada–s largest real estate investment trust with a total capitalization of approximately $14.7 billion as at September 30, 2014. It owns and manages Canada–s largest portfolio of shopping centres with ownership interests in a portfolio of 340 retail properties containing more than 80 million square feet, including 48 grocery anchored and new format retail centres containing 13 million square feet in the United States as at September 30, 2014. RioCan–s portfolio also includes 15 properties under development in Canada. For further information, please refer to RioCan–s website at .
Non-GAAP measures
RioCan–s consolidated financial statements are prepared in accordance with IFRS. Consistent with RioCan–s management framework, management uses certain financial measures to assess RioCan–s financial performance, which are not generally accepted accounting principles (GAAP) under IFRS. The following measures, RioCan–s Interest, Funds From Operations (“FFO”), Operating Funds From Operations (“Operating FFO”), Adjusted Net Operating Income, and Adjusted Earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) as well as other measures discussed elsewhere in this release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. RioCan uses these measures to better assess the Trust–s underlying performance and provides these additional measures so that investors may do the same. Non GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan–s performance, liquidity, cash flow, and profitability. For a full definition of these measures, please refer to the “Use of Non-GAAP Measures” in RioCan–s third quarter 2014 Management Discussion and Analysis.
Forward-Looking Information
This news release contains forward-looking statements within the meaning of applicable securities laws. These statements include, but are not limited to, statements made in this News Release (including the sections entitled “Highlights for the three and nine months ended September 30, 2014”, “Financial Highlights”, “Leasing and Operational Highlights”, “Portfolio Activity and Acquisition Pipeline”, “Liquidity and Capital”, and “Development Portfolio”), and other statements concerning RioCan–s objectives, its strategies to achieve those objectives, as well as statements with respect to management–s beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management–s current beliefs and are based on information currently available to management. All forward-looking statements in this News Release are qualified by these cautionary statements.
These forward-looking statements are not guarantees of future events or performance and, by their nature, are based on RioCan–s current estimates and assumptions, which are subject to risks and uncertainties, including those described under “Risks and Uncertainties” in RioCan–s Management–s Discussion and Analysis for the period ended September 30, 2014, which could cause actual events or results to differ materially from the forward-looking statements contained in this News Release. Those risks and uncertainties include, but are not limited to, those related to: liquidity in the global marketplace associated with economic conditions, tenant concentrations, occupancy levels, access to debt and equity capital, interest rates, joint ventures/partnerships, the relative illiquidity of real property, unexpected costs or liabilities related to acquisitions, construction, development projects, environmental matters, legal matters, reliance on key personnel, unitholder liability, income taxes, the investment in the United States of America (“US”), fluctuations in the currency exchange rate between the Canadian and US dollar and RioCan–s qualification as a real estate investment trust for tax purposes. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a stable retail environment; relatively low and stable interest costs; a continuing trend toward land use intensification in high growth markets; access to equity and debt capital markets to fund, at acceptable costs, the future growth program to enable the Trust to refinance debts as they mature; and the availability of purchase opportunities for growth in Canada and the US. Although the forward-looking information contained in this News Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements included in this News Release may be considered “financial outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this News Release.
The Income Tax Act (Canada) contains provisions which potentially impose tax on publicly traded trusts (the “SIFT Provisions”). However, the SIFT Provisions do not impose tax on a publicly traded trust which qualifies as a real estate investment trust (“REIT”). RioCan currently qualifies as a REIT and intends to continue to qualify for future years. Should this not occur, certain statements contained in this News Release may need to be modified.
Except as required by applicable law, RioCan under takes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Contacts:
RioCan Real Estate Investment Trust
Rags Davloor
President, COO & interim CFO
(416) 642-3554